ON THE CONTRARY; Are Spendthrift Americans Really the Problem?

By DANIEL AKST

Published: January 9, 2005

AS if an orgy of holiday spending weren't enough to remind us, the latest government figures provide a stark indictment of our profligacy. Personal saving as a percentage of disposable income was just 0.3 percent in November. Because savings, in the form of investment, are the lifeblood of the economy, our spendthrift ways will soon impoverish us or, at the very least, our children. We are sinners all.

This sounds compelling enough. But much as it may offend the many critics of materialism -- which I define as ''spending by others'' -- the whole notion that Americans don't save enough is overblown. Savings are hard to measure; the government's Bureau of Economic Analysis almost surely understates the true figure. And while we could all stand a little more thrift in our lives, we are in no danger of spending ourselves into oblivion. Indeed, absent the willingness of Americans to spend, the global economy would sputter, and millions of people in poor but rapidly industrializing countries like China and India would be far worse off.

Perhaps the biggest problem with the way the government measures savings is its failure to take account of changing asset values like rising home prices. If we looked at the balance sheets of American families, instead of just subtracting consumption from income, we would find a more favorable picture, despite some short-term volatility.

In a speech last fall, Roger W. Ferguson Jr., vice chairman of the Federal Reserve, expressed concern that households weren't saving more, but he acknowledged that the ratio of household net worth to disposable income ''has been essentially trendless over the past two decades,'' adding in a footnote that ''this alternative concept of the personal saving rate has, in fact, shown a slight positive trend since the early 1950's.''

The treatment of capital gains in the widely cited saving figure leads to a number of problems. Consider pensions. Employer contributions are counted as personal income, but later -- and larger -- payouts to retirees register as consumption, while the capital appreciation that substantially finances these payouts registers nowhere.

That's according to a Dartmouth economist, Steven F. Venti, who contended in a 2003 report written with two Dartmouth colleagues, Annamaria Lusardi and Jonathan Skinner, that the treatment of pensions had played a large role in dragging down savings to record levels, ''accounting for over 40 percent of the total decline in the personal saving rate from 1988 through the turn of the century.''

Other measurement issues also play a role. In a paper on alternative measures of personal saving, Marshall B. Reinsdorf, a research economist at the Bureau of Economic Analysis, asserts that adjusting the calculation for several such factors, including the treatment of spending on durable goods and the effect of inflation on interest rates, can account for much of the apparent decline in personal saving in the 1990's.

All this is to say nothing of savings by other sectors of society. After all, businesses, through retained earnings and capital appreciation, save, too. So can governments, when they run surpluses. Foreign capital also helps to satisfy the nation's investment needs, but with foreign investment comes foreign ownership. And if history is any guide, Americans will save more when interest rates rise and asset prices fall.

If there is a saving problem lately, it is in large part a tax problem in disguise. During the Bush administration, the rate of saving by the United States as a whole has been undermined by growing federal deficits arising from unwise and unfair tax cuts.

''Reducing the federal budget deficit -- or preferably moving it to surplus -- appears to be the most effective action that could be taken to augment domestic saving,'' said none other than Alan Greenspan, the Federal Reserve chairman, in a November speech. ''Corporate saving in the United States has risen to its highest rate in decades and is unlikely to increase materially.''

I like to think that sooner or later the political system will right itself. As an inveterate cheapskate, meanwhile, I am happy to join in the great Puritan tradition of condemning self-indulgence, but only on aesthetic grounds: materialism is distasteful even if it does reflect a laudable democratization of affluence. We should all save more, and many of us are too caught up with getting and spending. But these are moral questions more than economic ones. Look at the famously thrifty Japanese. They live badly by American standards, and their economy has been in the doldrums for years.

Maybe the problem isn't that we spend too much. Maybe the problem is that everyone else spends too little.